The following description of the background of the invention is provided simply as an aid in understanding the invention and is not admitted to describe or constitute prior art to the invention.
A point of sale (POS) may be a physical location, such as a store front or vendor's cart, or a virtual location such as a call-in number or website. A POS transaction is an exchange between a buyer that results in a purchase of goods or services in exchange for payment or a promise to make payment. A POS transaction may involve cash or an electronic funds transfer from a purchaser's financial institution to the financial institution of a merchant.
A POS sale may also involve the use of a credit card. In a credit card transaction, the merchant and the purchaser each have a contractual relationship with a card issuer. The card issuer agrees to pay the merchant the amount of the purchase price of the goods or services, and the purchaser agrees to pay the card issuer. The merchant is charged a fee that is at least in part determined by the amount of the charges incurred by the merchant's customers.
The risk on non-payment is allocated between the merchant and the merchant's processor according to the terms of the contract between them. Typically, if the merchant obtained all required information from the purchaser and followed all of the rules and regulations, the financial institution would bear the liability for the fraud. If the merchant did not get all of the necessary information, the merchant would be required to return the funds to the financial institution.
One option that is not available at the POS is the creation of a financing instrument that establishes a purchaser's obligation to pay for goods and/or services in installments while providing a merchant payment in full. Typically, such financing instruments, if available at all, are separately negotiated. While a purchaser may authorize a merchant to draw money from a purchaser's account or charge a purchaser's credit card on a recurring basis, the merchant is not paid in full until the payment cycle is completed. Separately negotiated installment instruments may also result in the merchant receiving less than full payment for the goods and services provided.